Hidden Motives

A look at the hidden factors that really drive our social interactions

Are Family Businesses Lazy?

A new study takes a closer look at family businesses.

The CEOs of family businesses “worked 8% fewer hours than managers without genetic ties to their companies.” This conclusion was reached by a study of CEOs in India, but it “found similar disparities in Brazil, Britain, France, Germany, Italy and the U.S.,” according to an article in The Wall Street Journal.

But what to make of it? The incentives and risks that motivate professional CEOs to burn the midnight oil just might not be a factor for family CEOs, said Raffaella Sadun, a Harvard strategy professor and one of the study’s authors. But is that a problem? An advantage? Is it good for business or bad? 

The conventional wisdom, of course, is that working less in a highly competitive world is bad. One CEO of a family business, who claimed he worked just as hard as any other CEO, noted that “a really unhealthy situation” is created when family members “are raised with the mind-set that they are entitled because of [what] their last name is.” Yes, but is that always true?

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It can be that family CEOs find it easier to balance work and their personal lives: “Wesley Sine, a researcher at Cornell’s Graduate School of Management who studies entrepreneurship, said that executives who are more oriented toward family and establishing a legacy are more likely to favor leisure.”

“You have a perspective that life is more than money,” he said.

At the same time, such executives are often pressured by the fact that their success or failure impacts family members dependent on them. Moreover, they can be anxious or insecure about being judged by their parents. 

The study conducted by professors at the Harvard and Columbia business schools as well as the London School of Economics, acknowledged that hours worked is a “very crude measure of effort.” A lot of work occurs informally, and family time is often rich with opportunities to communicate concerns and share ideas. (See, “Do CEOs of Family-Owned Businesses Work Less?”)

Can we conclude anything meaningful from the study? The Journal writes: “the jury is still out on whether family-owned businesses perform better or worse than firms with outside CEOs.” Given the complexity and variety of family dynamics, perhaps all the differences wash out in the end. 

McKinsey has found: “Fewer than 30% of family businesses are still standing by the third generation of leadership.” On the other hand, a paper in the journal Family Business Review noted similar survival rates in nonfamily firms. Businesses don’t last, whether or not they are family owned.

But why do people expect family businesses to be any better or any worse? And what accounts for the variety of opinions on the subject?

I suspect it is because family businesses are insulated from the more virulent pressures of investor capitalism. Not owned by strangers who focus exclusively on “shareholder value,” they elicit envy on the part of executives often judged by market factors over which they have little control. On the other hand, they can elicit contempt from executives who believe family CEOs have an easier job.

Objective measures of comparative success are hard to find, but that hardly stops people from having strong opinions on the subject.

Ken Eisold is a psychoanalyst and organizational consultant whose book about the unconscious, What You Don't Know You Know, came out in January.

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